JERUSALEM - Israel, challenged by a surprise Palestinian unity deal, said on Thursday it was born of panic by Hamas and Western-backed President Mahmoud Abbas over popular uprisings in Syria and Egypt.
The Jewish state has rejected Wednesday's announced reconciliation between the Islamist group that runs Gaza and Abbas's Fatah movement that exercises limited self-rule in the West Bank, a move that seemed certain to complicate any efforts to revive Israeli-Palestinian peace talks.
Israeli leaders have said they cannot talk to Hamas, which has spurned Western demands to renounce violence, recognise Israel and accept existing interim peace deals -- a position Prime Minister Benjamin Netanyahu reinforced on Wednesday.
"This deal ... stems from panic -- a huge panic," Foreign Minister Avigdor Lieberman told Army Radio, an assessment echoed by Defence Minister Ehud Barak in a separate interview.
"(Hamas leader) Khaled Meshaal, sitting in Damascus, sees his patron President (Bashar) al-Assad shooting up mosques, tanks firing deliberately (at civilians), and understands the ground is burning under him," the far-right minister said.
In the West Bank and Gaza Strip, Palestinians said the unity accord stemmed from a deep-seated popular desire to overcome the Hamas-Fatah divide and reflected frustration over the slow drive towards statehood.
"The signing of the agreement is very, very good and I pray to God to make it succeed because we are one people in one trench," said Salman al-Dairi, 50, who described himself as a Fatah supporter in Gaza.
Lieberman also said Abbas had "leaned for years" on Hosni Mubarak, the Egyptian president toppled by a pro-democracy revolt in February, and now felt his own position was shaky.
The result, according to Lieberman, was an alliance between Palestinian factions that "crossed a red line" for Israel and could ultimately lead to Hamas control of the West Bank.
He held out the possibility of withholding Palestinian tax revenues that Israel transfers to the Palestinian Authority and a suspension by the U.S. Congress of crucial financial aid to Abbas's administration if it shares power with Hamas.
Peace talks between Israel and Abbas's administration resumed in September in Washington but quickly broke down after Netanyahu refused to extend a partial moratorium on construction in Jewish settlements in the occupied West Bank.
Abbas has said he will not return to the negotiations until settlement-building is halted in the West Bank and in East Jerusalem, areas Israel captured in a 1967 war and which Palestinians want as part of a future state.
Israel has called that an unacceptable pre-condition, and has been lobbying Western governments to oppose an expected Palestinian bid to win recognition of a Palestinian state in the West Bank and Gaza at the U.N. General Assembly in September.
Next month, Netanyahu is due to address a joint meeting of the U.S. Congress, a speech that had been widely expected to include new, interim steps towards a peace agreement.
Speaking on Wednesday after the unity deal was revealed, Netanyahu cast more doubt on peace prospects. "The Palestinian Authority must choose either peace with Israel or peace with Hamas. There is no possibility for peace with both."
But Barak, who heads a small centre-left faction in Israel's rightist coalition, questioned whether the Palestinian unity deal, which envisages formation of an interim administration and elections later this year, would be implemented.
"I'm a long way from thinking this matter is around the corner or is going to happen," Barak said on Israel Radio.
Hamas won the last Palestinian legislative election held in 2006 and a unity government it formed with Fatah was short-lived, collapsing into a brief civil war in which the Islamists seized Gaza in 2007.
Barak said that if a new unity government is formed, Israel and the United States must agree on "a clear statement" saying talks with the Palestinian administration would be possible only if Hamas accepted the West's policy change demands.
Hamas's founding charter calls for the Jewish state's destruction but it has spoken of the possibility of a long-term ceasefire with Israel if a Palestinian state is created in the West Bank and Gaza. (Editing by Mark Heinrich)
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